Ishitha Kumar - Robo-advisors

A novel data on the complete list of robo-advisors (with names and launch dates) has been hand-collected for the purpose of my research study. I rely on the articles from several news and blog sources for financial advisory industry (thinkadvisor, financial planning, KITCES.com, etc.) to identify the names of robo-advisor service providers. I could identify 174 firms as the providers of robo-advisory services between 2006 and 2019. Among these, 98 firms started as robo-advisors; and 36 incumbent firms started robo-advisory services.

Fig: Number of Firms Entering the Robo-advisory Services Space between 2006 and 2019

Distribution of Robo-advisory Firms across States during 2006

Distribution of Robo-advisory Firms across States during 2019

Fig: Snapshot of Percentage of Various Types of Firms in 2019

Over 60% of the firms that offer robo-advisory services are large-advisory firms (firms that have regulatory assets and management greater than $100 million. Almost all the firms that offer robo-advisory services offer wrap fee programs (firms that offer a fixed fee for a bundle of services. This fee is usually a percentage of assets in an investors' account). Around 30 % of the firms that offer robo-advisory services are pension consultants.

Firms that offer robo-advisory services cater predominantly to individual clients. Around 60% of the firms that offer robo-advisory services had at least 50% of their clients as individuals. This percentage is higher than the industry average; during 2019 only 39% of the firms catered to at least 50% of individual clients.

Fig: Percentage of Individual Clients Catered to by Various Firms in 2019

Fig: Average Discretionary Regulatory Assets under Management across Various Types of Firms between 2006 and 2019

Fig: Average Number Discretionary Accounts across Various Types of Firms between 2006 and 2019

Fig: Average Number of Financial Advisors across Various Types of Firms between 2006 and 2019

Incumbent firms that are adopting robo-advisory services have higher number of financial advisors as compared to the industry, on an average. Firms that start as robo-advisory firms have lower number of financial advisors as compared to the industry, on an average. Similar pattern can be observed for discretionary regulatory AuM and number of discretionary accounts.